Under the Itan franchise agreement, what is the franchisee's obligation regarding transferring an equity interest in the business?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
- **4.
TRANSFER RESTRICTIONS**.
We must approve all Persons who own an Equity Interest in the Business or Franchisee Entity.
If you are an Owner, you agree that you will not Transfer an Equity Interest in the Business or Franchisee Entity except in accordance with §19 of the Franchise Agreement.
- **19.3.
Permitted Transfers.** You may engage in a Permitted Transfer without our prior approval, but you must: (a) give us at least 10 days' prior notice; and (b) upon our request, cause the former Franchisee Entity to sign a corporate guarantee in the format we require to secure performance of the new Franchisee Entity's financial obligations under all Definitive Agreements (if the Permitted Transfer results in a new Franchisee Entity).
You and the Owners (and transferee) must sign all documents we reasonably request to effectuate and document the Permitted Transfer.
- **19.4.
Owner Death or Disability.** Within 180 days after an Owner's death or permanent disability, the Owner's Equity Interest in the Business or Franchisee Entity must be Transferred to another Person in compliance with §19.2 or §19.3.
- **19.5.
Our Right of First Refusal.** If you or an Owner wish to engage in a Transfer, you or the Owner, as applicable, must obtain and send us a bona-fide offer executed by the purchaser after completion of due diligence.
(j) you and your Owners sign a General Release;
(k) you agree to subordinate the transferee's financial obligations to you to the transferee's financial obligations owed to us pursuant to the franchise agreement (we may require you to enter into a written subordination agreement);
(l) we choose not to exercise our right of first refusal described in §19.5; and
(m) you or the transferring Owner, as applicable, and the transferee satisfy all other conditions we reasonably require as a condition to approval of the Transfer.
Our consent to a Transfer shall not constitute a waiver of any Claims we have against the transferor or our right to demand the transferee comply with all terms of the franchise agreement.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, franchisees who are owners are restricted from transferring an equity interest in the business or franchisee entity, except as outlined in Section 19 of the Franchise Agreement. Itan must approve all individuals who own an equity interest in the business or franchisee entity.
Itan also has specific requirements regarding transfers. Franchisees may engage in a 'Permitted Transfer' without prior approval, provided they give Itan at least 10 days' notice. Upon Itan's request, the former franchisee entity must sign a corporate guarantee to secure the new franchisee entity's financial obligations under all definitive agreements if the permitted transfer results in a new franchisee entity. Both the franchisee, owners, and transferee must sign all documents Itan reasonably requests to complete and document the Permitted Transfer.
In the event of an owner's death or permanent disability, the owner's equity interest in the business or franchisee entity must be transferred to another person within 180 days, in compliance with sections 19.2 or 19.3 of the agreement. Itan also retains the right of first refusal if a franchisee or owner wishes to engage in a transfer. In such cases, the franchisee or owner must obtain a bona-fide offer executed by the purchaser after due diligence and send it to Itan.
If Itan consents to a transfer, this does not waive any claims Itan has against the transferor, nor does it negate the transferee's obligation to comply with all terms of the franchise agreement. Additionally, in the context of transfers, the franchisee and their owners must sign a general release, agree to subordinate the transferee's financial obligations to the franchisor, and satisfy any other conditions Itan reasonably requires for approval of the transfer.